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Company Act
1. Conditions on Dividends and Bonus of Special Shares
The Ministry of Economic Affairs (MOEA) issued a ruling on 11 March 2021 in relation to issuance of special shares. Where a company issues special shares in accordance with Article 157 of the Company Act, certain conditions may be clearly set forth in the Articles of Incorporations for paying certain amount or percentage of dividends and bonus on special shares. The Articles of Incorporations may further provides that special shares may be entitled to a higher ratio of dividends and bonus when certain conditions are met.
Reported by: Mike Lu / Hsiyen Hsu
2. Shares Contribution by License of Technical Know-how
The MOEA issued a ruling on 11 March 2021 that according to Article 272 of the Company Act, new shares issued can be subscribed by existing shareholders or by identified persons by an agreement without public offering and the consideration of which may be in the form of technical know-how required by the company as well as license of the same.
Reported by: Mike Lu / Lily Huang
Enterprises Mergers And Acquisitions Act
3. Ruling on Calculation of Voting Right under Share Exchange
The MOEA issued a ruling on 12 March 2021 that the number of shares held by shareholders exercising appraisal rights by expressing objections and surrendering voting rights under Article 12 of the Enterprises Mergers and Acquisitions Act shall be counted towards the total number of issued shares of the listing or OTC company for the purpose of resolution for share exchanges with a de-listing of the company. That is, the voting shall be based on the total number of issued shares without deducting the number of shares surrendering the voting rights.
Reported by: Mike Lu / Lia Wang
Labor
4. Draft Worker Occupational Accident Insurance and Protection Act
On 25 March 2021, the Executive Yuan announced the draft Worker Occupational Accident Insurance and Protection Act to separate the occupational accident insurance from the Labor Insurance Act and consolidate the Act for Protecting Worker of Occupational Accidents to build up a protection system covering prevention, remedies and rehabilitation of occupational accidents. We summarize below:
(1) Employers with practice license, registered according to applicable laws, or having tax registrations, regardless of the number of workers hired, shall insure their employees for occupation accidents insurance. (Article 6)
(2) The occupational accident insurance will take effective from the employee’ on board date. Even if the employer fails to file for application of occupational accidents insurance, the employee can still claim for insurance benefits if accidents occur. (Article 13)
(3) The insured salary cap shall be delinked from the labor insurance, and it is proposed to increase from the current NT$45,800 to NT$72,800. (Article 17)
(4) Various insurance payments are raised. (Articles 28 to 58)
(5) The appraisal of occupational diseases will all be carried out by the central competent authority, and the local competent authority will no longer do the same. (Article 75)
Reported by: David Tsai / Alex Li
5. Amendment to Labor Union Act
The Executive Yuan announced the amendment to Article 19 of the Labor Union Act on 20 January 2021 according to which a member reaching the age of adult is eligible for election to act as the director or supervisor of the labor union. The amendment will take effect on 1 January 2023.
Reported by: David Tsai / Cindy Chien
Securities Firms
6. Draft Amendment to Standards Governing Establishment of Securities Firms, Regulations Governing Securities Firms and Regulations Governing Responsible Persons and Associated Persons of Securities Firms
The Financial Supervisory Commission (FSC) announced the draft amendment to ''Standards Governing the Establishment of Securities Firms'', ''Regulations Governing Securities Firms'' and ''Regulations Governing Responsible Persons and Associated Persons of Securities Firms'' on 25 March 2021,. We summarize below:
(1) A securities broker is allowed to operate the brokerage business for trading and exchanging beneficiary certificates of funds: To stipulate the paid-in capital, operating bond for the securities broker only operating the said business. Such securities brokers are exempt from certain requirements under the Regulations Governing Securities Firms and the Regulations Governing Responsible Persons and Associated Persons of Securities Firms. Taipei Exchange is authorized to regulate and establish relevant regulations.
(2) The applicants of financial technologydevelopment and innovative experimentation in relation to securities business are allowed to apply to transform to securities firms: The said applicants meeting certain requirements may apply with the FSC to transform to securities firms.
(3) Securities firms are exempt from the restriction of selling amount and price of the securities borrowed: To stipulate that for the need to provide trading quotes or hedging as a stock market marker by securities firms, the said securities firms are exempt from the restrictions that the selling price of the securities borrowed must not be lower than the closing price of the previous business day.
Reported by: Jeffrey Liu / Lia Wang
Securities Investment
7. Updates to Rulings in relation to "Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals"
The FSC announced a ruling on 23 March 2021 in relation to Sub-Paragraph 6, Paragraph 1, Article 4 of the "Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals", which provides that exchange traded notes (ETN) issued in accordance with the "Regulations Governing the Issuance of Exchange Traded Notes by Securities Firms" can be invested by overseas Chinese and foreign nationals, provided that the calculation method for benchmark value of such ETN shall not include the exchange rate of NTD.
The FSC also announced to include ETN to the investment scope of overseas Chinese and foreign nationals accordingly.
Reported by: Jeffrey Liu / Doris Huang
Insurance
8. Ruling on the Insurance Act
The FSC issued a ruling on 26 March 2021 in relation to Article 145-1(2) of the Insurance Act. We summarize below:
(1) From the fiscal year of 2020, insurance companies are required to set aside all profit after tax as special surplus reserve for the disability insurance compliance with certain conditions. If the annual profit after tax is not sufficient to set aside the special surplus reserve, the insurance company shall make up the special surplus reserve in the following year.
(2) The calculation of the profit after tax mentioned above shall be calculated as follows:
(a) The investment income shall be calculated with the ratio of product reserve; and
(b) The expense shall be calculated on the reasonable allocation basis of the actual expenses.
Reported by: David Tsai / Lily Huang
Financial
9. Regulations Governing Semi-Discretionary Individually Managed Money Trust Business by Trust Enterprise
The Trust Association of the Republic of China announced the Regulations Governing Semi-Discretionary Individually Managed Money Trust Business by Trust Enterprise on 19 March 2021. We summarize below:
(1) When trust enterprise conducts such business, for customers adopting the same operating scope or method on the individual trust fund, it shall use and manage funds separately and establish segregated accounts. The trust enterprise shall not establish a single account to collectively use and manage funds and share interests. The trust enterprise shall state the relevant rights and responsibilities in the trust deed.
(2) With reference to the Regulations Governing Trust Enterprise Establishing Product Suitability Policy for Non-Professional Investors” regarding the product suitability, the review of risk tolerance levels and the relevant fiduciary investment principle for non-discretionary money trust, to stipulate the regulations concerning the product suitability for such business.
(3) With reference to the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises, Regulations Governing Concurrent Conduct of Discretionary Investment Business by Trust Enterprises, Trust Enterprise Act, Regulations Governing the Scope of Business, Restrictions on Transfer of Beneficiary Rights, Risk Disclosure, Marketing, and Conclusion of Contract by Trust Enterprises and other relevant regulations, to stipulate the rights protection of beneficiary and the prevention of conflict of interest for the trustee.
Reported by: Stacy Lo / Hazel Wei
10. Amendment to Regulations Governing Real Estate Mortgage Loan by Financial Institutions
On 18 March 2021, the Central Bank announced the amendment to the Regulations Governing Real Estate Mortgage Loan by Financial Institutions, which took effect on 19 March 2021. We summarize below:
(1) When a financial institution extends a housing loan to a company, the loan amount shall not exceed 40% of the house’s appraised value (land included) or its purchase price, whichever is lower.
(2) Restrictions on housing loan extended by a financial institution to a natural person:
(a) For high-priced housing loans: For a natural person with no housing loan or two or less housing loan, the loan amount shall not exceed 55% of the house’s appraised value (land included) or its purchase price, whichever is lower; for a natural person with three or more housing loan, the loan amount shall not exceed 40%.
(b) For normal housing loans: For a natural person with two housing loan, the loan amount shall not exceed 55% of the house’s appraised value (land included) or its purchase price, whichever is lower. For a natural person with three or more housing loan, the loan amount shall not exceed 50% of the house’s appraised value (land included) or its purchase price, whichever is lower. In addition, for aforementioned natural persons, no grace period is allowed, and the loan amount shall not be increased for reasons of home renovation, working fund or other purposes.
(3) When a financial institution extends the loan with mortgage on unsold new housing, the loan amount shall not be increased for reasons of working fund or other purposes.
(4) When a financial institution extends the loan with mortgage on an idle land in industrial zoning, the loan amount shall not exceed 55% of the financial institution’s appraised value, and shall not be increased for reasons of working fund or other purposes, unless under any of the following circumstances:
(a) The mortgaged land has been constructed; or
(b) The borrower submits a specific construction plan for the mortgaged land, and undertakes that the construction will begin within a specified period of time.
Reported by: Stacy Lo / Will Chen
11. Draft amendment to the Guideline on Application by Banks (including OBU) for Concurrently Conducting Underwriting and Proprietary Trading Business in Bond, Beneficiary Securities and Asset-backed Securities
The FSC announced the draft amendment to its ruling No. 10801097470 issued on July 10, 2019 on 30 March 2021,, which is the Guideline on Application by Banks for Concurrently Conducting Underwriting and Proprietary Trading Business in Bond, Beneficiary Securities and Asset-backed Securities for public consultation. We summarize below:
(1) Foreign bank branches may include 50% of the allowance for bad debts and guarantee liability reserve into the net value of foreign bank branches.
(2) The trading limit for proprietary trading of foreign securities between a bank and its overseas related company shall be calculated based on the calculation basis for banks rather than the securities firm’s net value which is provided under Article 31-3 of the Regulations Governing Securities Firms.
(3) The acquisition of non-equity-type corporate bonds issued by overseas subsidiaries and sale on the same day by the bank may be exempted from the restriction set forth in Article 5 of the Directions Governing Limitations on Types and Amounts of the Securities in which a Commercial Bank May Invest and the bank shall promulgate the transaction procedures, risk management and audit procedures.
Reported by: Stacy Lo / Rady Lee
SITE/SICE
12. Amendment to Checklist of Internal Control System for Master Agents or Sales Agents Operating the Offshore Funds related Business
The Securities Investment Trust and Consulting Association of the R.O.C announced on 22 March 2021the amendment to "Checklist of Internal Control System for Master Agents or Sales Agents Operating the Offshore Funds related Business", to reflect the amendments of relevant laws and regulations. We summarize below:
For master agents:
(1) To add the following items to be included in the public announcement and post report: Daily report for funds’ information, financial report, prospectus, and investor brochure;
(2) To add the following items to be included in the personnel selection and training: To allocate adequate and competent business personnel and auditors; and
(3) To add other audit items: Prevention of short-term trading, Know Your Product (KYP), efficient management of the sales channels and the payment for channels remuneration and sales activities.
For sales agents:
(1) To delete the requirement for daily report for funds’ information; and
(2) To add other audit items: Prevention of short-term trading, and KYP.
Reported by: Jeffrey Liu / Eliza Lee
Medical Devices Act
13. Ruling regarding Establishment of Good Distribution System for Medical Devices
The Ministry of Health and Welfare issued a ruling on 18 March 2021 that a medical device dealer who has obtained the medical device permit for certain medical devices shall establish a good distribution system for such medical device(s).
Reported by: Kang-Shen Liu / Will Chen
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2021-04-07
